Pakistan is a cash based society and paying habits are not expected to be changed in near future. We believe that this transformation of majority of consumer's habit to pay the utility payment using an electronic method will take a long time of around five to ten years.
During this transition period, various utilities and commercial companies will introduce different schemes to the market.
Each of these schemes will result in varying degrees of success, based on the fact that this market is in infancy in Pakistan and consumer pattern is difficult to predict.
We are, therefore, of the opinion that a single payment solution will not be successful in attracting large consumers and different schemes must be employed over a period of time.
Currently most of the subscribers pay their utility bills in cash through bank's branch windows, which has proven to be not very affective way to control fraud as well as has many reconciliation problems besides being a troublesome method for consumer as well as banks.
Some banks have recently tried other means in a smaller market with limited outlets but to-date a very successful and acceptable alternative to the consumers has not yet been introduced.
BILL PAYMENT INSTRUMENTS/FACILITIES: Bill payment is a very complex and wide subject and the theoretical discussion can lead to many pages of reading. To avoid unnecessary details, the only options considered here are the ones, which may have some application in Pakistan.
An automated utility bill payments scheme can use one or more of the following payment instruments: -
1. Payment through plastic card (Credit, Debit, ATM or special cards)
2. Payment through check
3. Standing Order (direct debit)
4. Prepaid Cards
5. Cash card (electronic wallet)
6. Cash
The first three (3) instruments are for consumers with an account in a Pakistani bank, while they could also use the later three types as convenient to them.
The consumers without an account or no funds in bank account must use one of the three instruments numbered 4 to 6 above.
The outlets or facilities where one or more type of payment instruments can be used may vary depending on the type of facilities available, besides the cash method presently used at manned bank kiosks.
Therefore, we will present the type of possible facilities that consumers can interact with for each the six (6) payment instruments mentioned above: -
1) Payment through plastic card (Credit, Debit or ATM cards)
a) Retail outlet / Manned Kiosk
b) Mobile phones (SMS/WAP messaging)
c) Telephone (IVR, Call center)
d) ATM machine
e) POS machines
f) Internet Portal
g) Drop Box
h) Electronic Kiosks
2) Payment through check
a) Retail outlet / Manned Kiosk
b) ATM machine (drop facility)
c) Drop Box
d) Electronic Kiosks (drop facility)
3) Standing order (direct debit)
a) Retail outlet / Manned Kiosk
b) Mobile phones (SMS/WAP messaging)
c) Telephone (IVR, Call center)
d) ATM machine
e) Internet Portal
f) Drop Box
g) Electronic Kiosks
4) Prepaid Cards
a) Retail outlet / Manned Kiosk
b) Mobile phones (SMS/WAP messaging)
c) Telephone (IVR, Call center)
d) ATM machine
e) POS machines
f) Internet Portal
g) Electronic Kiosks
5) Cash Card (electronic wallet)
a) Retail outlet / Manned Kiosk
b) Mobile phones (SMS/WAP messaging)
c) Telephone (IVR, Call center)
d) ATM machine
e) POS machines
f) Internet Portal
g) Drop Box
h) Electronic Kiosks
6) Cash
a) Retail outlet / Manned Kiosk
b) Mobile phones (SMS/WAP messaging)
c) Telephone (IVR, Call center)
d) ATM machine (drop facility)
e) Electronic Kiosks with cash acceptor/scanner
Each of the payment facility has its advantages and disadvantages. The consumer payment trend is not likely to change from the current method to one of the above methods in short term.
There is a varying degree of capital costs, operational costs and risk factors involved in each of the methods.
Moreover, each consumer will have his own reasons for preferring a certain instrument as well as facility for bill payment.
Considering Pakistan we feel that following combination of options are available for implementing an automated bill payment solutions: -
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Retail Mobile Phone
outlet/ Phone (IVR, ATM POS Internet Drop Electro
Mann SMS/ Call machines machine Portal Box Kiosk
d Kiosk WAP) center)
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Card (Credit, Debit & ATM) Yes Yes Yes Yes Yes Yes Yes Yes
Payment through cheques Yes No No No No No Yes No
Standing Order (direct debit) Yes Yes Yes Yes No Yes Yes Yes
Prepaid Cards Yes Yes Yes Yes Yes Yes Yes Yes
Cash card (electronic wallet) Yes Yes Yes Yes Yes Yes No Yes
Cash Yes Yes Yes Yes Yes Yes No Yes
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THE WAY FORWARD FOR BANKS: In these circumstances Bank's effort to launch Billing Portal is the right step in changing the pattern for bill payment for the consumer.
It would also open the market for alternate means of utility bills payments. This has provided an opportunity for the banks and solution providers to work as a catalyst in the market, with many companies gearing up with banks to get into this market.
One of the reasons the market did not see any major moves in this area was a very low cost per bill paid by the utility companies.
Also, the banks are now waking up to intense and increasing competition and wish to provide value added services to retain utilities and large consumers.
SSGC has around 1.5 million working connections in the province of Sindh for which monthly bills are issued.
The total number of bills issued by SSGC is more than 20 million per year, out of which approximately 80% are in the Karachi.
Similarly PTCL issues more than 0.8 million/bills/month and KESC over 1.2 Million/bills/month for Karachi region.
Overall on Pakistan basis major utility companies WAPDA, KESC, SNGPL and PTCL issue a total of 170 million bills per year out of which approximately 40% are in the major cities of Pakistan. Moreover, local bodies/corporations issues another 30 million/bills/year.
These Bills are being paid through conventional means through network of existing Bank Branches for which utility companies have agreements with many Banks in relevant areas.
1. Cash collection through the banks: it is a normal system of payment. However, the multinational / private banks have also been authorised to collect the utility bills through telephonic instructions.
Recently payment has also been started through ATMs and Kiosk. Utility companies have various models for paying per bill to the bank as collection charges, whereas processing of stubs / recovery is being done by utility companies as well as by banks.
2. Some of the banks are charging per bill service charges to the customers and non-customers depending upon the level and type of service and payment methodology. Few of the banks are also offering bills payment services Free of charge to their customer.
1.2. Justification of Billing Portal (case study of SSGC 2003)
BILLING PATTERN FOR THE SSGC SHOWS FOLLOWING:
1. Out of 1.155/ million SSGC consumers in Sindh province, Karachi has population of 1.1/million consumers, with average bill of Rs 193/ per month for residential consumers.
They contribute 20% of the revenue while only 2000 industrial consumers contribute for 80% of the revenue of SSGC, with average of Rs 775,000 whereas 18,000 commercial consumers are paying an average of Rs 5000 per month.
2. Internet penetration statistics shows that Cities of Sindh has around 350,000 Internet users and Karachi contributes more than 80% of Internet penetration of Sindh. It includes direct users, and Internet Caf‚ users.
3. Various banks have issued about 500,000 credit cards and these could be a major source of payment mechanism, since our consortium has letter of support with Union bank, credit card transactions can be processed, if required and the merchant account charges are agreed upon between all parties.
Moreover, it has been reported that there are 500,000 ATM / Debit cards in circulation, which would be doubled by the yearend. All of these 1.5/million cards could be used to pay SSGC bills through the Portal.
4. SSGC portal has very high chances of success, since around 25% of SSGC consumers already have access to the Internet.
5. Aggressive marketing effort / campaign by SSGC would change the bills payment patterns for consumers, and consumers would like to pay the SSGC bill using Internet from office, home or cyber cafe.
6. The cash flow for SSGC would be improved and disconnection problems would also be resolved.
Based on above cited case study Billing Portal by banks is justified that may be used by all utility companies on sharing basis.
2. ALTERNATE PAYMENT CHANNELS:
Multi channel strategy can be implemented in phases. Various utility companies would use different models as per requirement of the area and customer facilitation.
2.1. All customers who would like to pay the bills through Internet Portal will have to go through registration process to unless they would like to pay through credit card or cash mechanism.
However, due to convenience and security reasons of their credit card information, it is preferable that the customer goes through one time registration process.
This process is expected to be very easy and we expect that the utility companies would facilitate sending the registration forms along with monthly bill for at least 6 months, after start of the service.
2.2. The registration process will identify all the bills for a customer (multiple bills could be supported) and the standing instructions or credit/debit card information and bank account details. A suitable form will be sent to customers only after the approval of relevant authorities.
2.3. PAYMENT MECHANISMS: All payment mechanisms that are available at our disposal in the market today could be used in due time after making arrangements with each party (banks, utility companies, service providers, customers).
As more facilities are introduced in the market, in the next few years, we would see the possibility of the success by incorporating as many channels as possible to serve customers.
The charges however, may be different for each type of mechanism as the cost may also be different depending upon the bank / utility company policies.
2.3.1. INTERNET PORTAL: This will be cheapest mechanism for payment by the customer. However, the customer has to pay a type of payment instrument as well.
This service will be available from the very beginning covering most payment instruments except cash.
2.3.2. THROUGH ALL AVAILABLE ATMS:
The payment through ATMs will be another cheap mechanism for customers. Most ATMs will be connected over a switch and if the customer wants to use a ATM / debit card for his account with an online branch on the ATM network, the cost is expected to be lower and we feel that all banks will join in later as they have nothing to loose from offering this service.
This service is expected to be available on all ATMs by end of 2003.
2.3.3. DROP BOXES IN PARTNER BANK BRANCHES/RESELLERS:
If a customer is registered and he has authorised standing instructions available with bank for payment of bills through bank account, it will initiate a transaction for any branch whether offline or online.
For an offline branch the processing fees should be a little higher (about Rs 5/transaction higher) than the online transaction and NIFT is rightly placed to process all offline branch transactions with standing instructions.
This offline model has been implemented successfully by NIFT in Lahore.
2.3.4. EXISTING MANUAL/SEMI-AUTOMATED KIOSKS OF FOR EXAMPLE SCB AND CITIBANK:
SCB and Citibank are operating utility bills Kiosks in Karachi and other cities.
2.3.5. CASH MECHANISM THROUGH PRE-PAYMENT MECHANISM BY RESELLER (RETAILERS AND INTERNET CAFES): The banks and utility companies have discussed this model many times since it improves the cash flow for service provider.
Banks / Utility companies would appoint suitable resellers for making it easier for customers to pay their bills in cash through conveniently located stores or shops. As a matter of fact cash mechanism is ideally suited for our society, at least for present.
Utility Companies will receive their guaranteed cash in advance through prepaid mechanism. Currently PTCL, Mobile phone companies and ISPs are using this model very successfully.
2.3.6. PAYMENT THROUGH CREDIT CARD: This method is being used successfully over Citibank Payment Gateway of Ufone and other service providers. Hopefully other Payment Gateways would come forward to offer payment over Internet.
2.3.7. ONLINE DEBIT OF DESIGNATED CUSTOMER BANK ACCOUNTS / STANDING INSTRUCTIONS TO DESIGNATED BANK BRANCHES: The customer's pre-registration would be required for payment of bills through direct debit using Internet, and it is desirable that the customer can mention all bills on his screen, for payment, along with the desired bank and account he want to pay it from.
2.3.8. DEBIT / ATM CARDS AND MOBILE PHONES: Customer can pay the utility bill through ATM, POS, Debit / ATM Card. Several banks are offering these services now. Although bills information service is available on mobile but bills payment is yet to be implemented.
2.3.9. CASH PAYMENT THROUGH UTILITY COMPANY AUTHORIZED DEALERS, IN CASH: This system is already getting popular especially in ISP and Mobile Phone companies.
Currently each company has a separate dealer for each service. With mixing and blending the service could be improve to facilitate the customer to pay bill anywhere, would result in increased cash flow for the utility company.
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